Leidos Holdings (LDOS) Beats On Q3 Earnings, Raises '17 View

Leidos Holdings, Inc. (NYSE:LDOS) reported third-quarter 2017 adjusted earnings of 95 cents per share, beating the Zacks Consensus Estimate of 80 cents by 18.8%. The reported number, however, declined 24% from the year-ago figure of $1.25.

Total Revenue

Leidos Holdings posted total revenue of $2,503 million in the quarter, which missed the Zacks Consensus Estimate of $2,505 million by 0.1%. However, the reported figure improved 34% year over year.

Backlog

At the end of the third quarter, the company’s backlog of signed business orders was $17.7 billion, of which $5.6 billion was funded. Total backlog at the end of the previous quarter was $17.1 billion, of which $5 billion was funded.

Operational Statistics

Total cost of revenues in the reported quarter surged 34.3% to $2,189 million. Operating income was $151 million compared with $101 million in the year-ago quarter.

Interest expenses were $36 million, up from $28 million in third-quarter 2016.

Segment Performance

Defense Solutions: Net sales at the segment improved 19% to $1,201 million from the prior-year figure of $1,009 million. However, operating income declined to $80 million from the year-ago tally of $93 million, with operating margin contracting 250 basis points (bps) to 6.7%.

Health: The segment recorded net sales of $464 million in the reported quarter, up 54.7%. While operating income increased 125% to $63 million, operating margin expanded 430 bps to 6%.

Civil: Net sales at the segment were $838 million, up 49.9%. While operating income increased 31.6% to $50 million, operating margin contracted 80 bps to 6%.

Financials

Cash and cash equivalents as of Sep 30 were $287 million compared with $376 million as of Dec 30, 2016. Net cash outflow from operating activity in the third quarter was $268 million, compared with $273 million a year ago.

Guidance

For 2017, the company raised its earnings expectation in the range of $3.60 to $3.75 per share from $3.45 to $3.60, projected earlier.

However, revenues are still expected to be in between $10.1 billion and $10.4 billion.

Adjusted earnings before interest, tax, depreciation and amortization margin is anticipated in the range of 10.2−10.4%, up from the prior range of 9.8−10.2%. Also, Leidos Holdings raised its projection of cash flows provided by operating activities from continuing operations to be $490 million or more, up from $475 million, guided earlier.

Peer Releases

Lockheed Martin Corp. (NYSE:LMT) reported third-quarter 2017 earnings from continuing operations of $3.24 per share, which missed the Zacks Consensus Estimate of $3.25 by 0.3%. This company’s bottom line also declined from the year-ago period’s figure by 10.2%.

Northrop Grumman Corp. (NYSE:NOC) reported third-quarter 2017 earnings of $3.68 per share, beating the Zacks Consensus Estimate of $2.92 by 26%. Reported earnings were also up 9.9% from $3.35 in the year-ago quarter.

The Boeing Company (NYSE:BA) reported adjusted earnings of $2.72 per share for third-quarter 2017, surpassing the Zacks Consensus Estimate of $2.65 by 2.6%. The bottom line, however, declined 22.5% from $3.51 in the year-ago quarter.

Zacks Rank

Leidos Holdings holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here..

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